District roads cry for attention amid infrastructure financing challenges
By Pradeep Kumar Panda
Bhubaneswar, March 3: Infrastructure contributes significantly to economic development both by increasing productivity and by providing amenities that enhance the quality of life. The impact of infrastructure on economic growth is well documented. Elasticities of output with respect to various stocks of infrastructure indicate that the transport and communication sectors play a dominant role in explaining the variations in GDP and its subsectors in Indian economy.
India has one of the largest road networks in the world, aggregating to 3.34 million km. If India has to achieve the kind of economic growth rates that have now become a matter of common aspiration, infrastructure must become even more of a priority than it has been. Inadequate infrastructure acts as significant constraint on India’s growth potential and retards GDP growth rate by 1-2 per cent p.a. (estimates), while also acting as a major barrier to Foreign Direct Investment and hinders the objective of inclusive development.
The present condition and stage of development of state highways and major district roads varies widely from state to state. The status of major district roads is particularly worrisome. The main reason for this state of affairs is that the funds for the development of this secondary system are very inadequate.
The National Highways are provided with reasonable funds for their development at the Central level while the rural roads receiving the lion’s share at the State level. In the process, the secondary system of roads is neglected.
The growth of population has put urban infrastructure and services under severe strain. Smaller cities have found it particularly difficult to cope with the increasing demands on services because of inadequate financial resources. Urban areas in India present a grim picture with regard to availability of basic infrastructure.
Urban infrastructure investment suffers from the lack of resources resulting from inadequate municipal finances and low user charges. With the state of Central and State finances being what it is, precious little can be done by way of downward devolution. For the provision of public goods, there is little alternative to the generation of local resources through local taxes, in particular property taxes, which should be buoyant in the face of rapid urbanisation and an incipient housing boom.
City roads are inadequate for traffic requirements, leading to congestion and fast deterioration in quality of roads due to excess loads. The state of services reflects the deterioration in the quality of city environments.
At present, developing countries spend over $200 billion a year on infrastructure development. About 90 per cent of this is sourced from Government tax revenues or funds intermediated by Governments, which bear almost all project risks. On an average, half of Government investment spending is accounted for by the infrastructure sectors. In addition, maintenance and operating expenses command a high share of current expenditures. However, Governments’ ability to spend on infrastructure has been severely constrained, partly due to poor performance and pricing and partly because Government budgets have come under tightness due to macroeconomic reasons.
All constraints to private sector investment must be loosened so that it can at least partially compensate for the lower than desirable level of public investment. There is no escape from raising the public sector levels of infrastructure investment since some infrastructure services are really public goods, whereas others exhibit partial public good characteristics. (To be continued…)
About The Author
